Thoughts on the Markets

Friday, September 18, 2009

The market has continued its incredible rally the last couple months now trading 56% off the lows. I have argued for short opportunities twice in this rally and found myself quickly proven wrong. Granted, I have kept the long XLK and long OIH positions alive for the long-term, but I have looked for short-term active shorting opportunities. But, I've been wrong and any minor pull-in has been quickly bought by the bulls.

Our gold position is working very nicely with prices now consolidating above the $1,000 level. The move higher in gold has been inextricably linked to the move higher in equity markets. For gold to make our anticipated move higher, I would expect it to decouple from the equity markets. For now, we have great prices in the GLD ETF and it's just a waiting game. The expected move with either happen, or it won't. With a cost basis from much lower, we will wait for the trade to trigger through the all-time highs of $100.44 before adding more to the position. It should work according to our thesis and we are patient.

I believe it was Peter Lynch who said something to the effect of: "The best returns in the stock market are generated when the state of the economy goes from horrible to bad." This year's rally off the March lows has been a great lesson in this dynamic. The turn and ensuing rally produced rapid phenomenal profits for those with the insight enough to see the turn and the stomach to hold a steep rebound in prices after witnessing last year's collapse in prices. I am trying to deeply engrave this concept in my mind for the next bear market.

In the short-term, the markets are continuing their trek higher without so much as a pause. Many a financial pundit has been proven incorrect in their sell calls, myself included. This week though, a couple short opportunities have presented themselves. A short in the casino stocks on Wednesday and GE yesterday provided something for the bears out there. Yet, after the initial move, there was not much follow-through. All we can say is don't fight the tape, ride the wave with stops to protect profits.


Mr. Zulu said...

Thank you for your candid opinion!

Brandon Rowley said...

Thank you Mr. Zulu! How is Indonesia treating you?

Post a Comment